Insurers Arming Against Piracy

By Pat Speer
Insurance Networking News,

The expected uptick in criminal activity prompts insurers to partner with maritime associations to set guidelines, hire armed guards.

Monday may have been the official “talk like a pirate” day, but to ship insurers, piracy is no laughing matter.

Attacks by pirates on oil tankers, especially those in the Indian Ocean, are cause for great concern, and insurers are taking steps to combat this growing risk management issue. At the International Union of Maritime Insurance (IUMI) annual meeting in Paris, IUMI confirmed that there were more than 20,000 transits a year in the Gulf of Aden and the Indian Ocean. Seaborne gangs are set to ramp up attacks in the area after the monsoon season ends.

Insurance brokerage Aon agrees. In addition to a review of emerging piracy threats on the west coast of Africa, “piracy activity in four key risk zones off the east coast of Africa,” is also an increased threat, notes Aon in a special report issued last week.

Aon’s report, issued by its Kidnap and Ransom Practice, uses piracy data from 2009 to 2011 to clarify the changing trends in regional and seasonal Somali piracy activity.

In response to this rise in both geographical areas and criminal activities, IUMI says that insurers are in support of hiring private armed guards on merchant vessels at sea to combat Indian Ocean and in particular, Somali attacks.

Industry delegates at the annual conference said that as a result of overstretched navies, the hiring of private armed guards to accompany ships is increasingly seen as an effective deterrent against pirates.

In the past, both insurers and ship owners were reluctant to use armed private contractors, partly due to legal liabilities and risks inherent with bringing weapons into some territorial waters and partly due to the fear of escalating violence.

To mitigate this risk, the IUMI said the use of private guards should comply with the legislation of the flag state.

“It’s not going to resolve the problem but at least it’s going to protect some of the vessels and property going through the Indian Ocean,” IUMI President Ole Wikborg said of private armed guards at a press briefing.

Individual insurers rejected any suggestion they were profiting from providing piracy cover, saying premiums did not usually cover their costs in ransom and damage claims, and with most piracy claims being met except where war conditions applied.

French maritime economics institute ISEMAR said that currently there are approximately 1,000 private guards employed by ships to counter Somali pirates.

Industry group the Security Association for the Maritime Industry (SAMI), which has 58 members, is hoping to get the first companies to complete an accreditation process by the second quarter of 2012, founding member Peter Cook said. This will result in a list of audited security firms able to provide armed guards.

Ship owner associations, meanwhile, have called on the United Nations to create an armed military force to be deployed on vessels to counter piracy and restrict the growth of unregulated private contractors.

Attacks by Somali pirates could rise to 250 in 2011 from about 200 in each of the two previous years, and pirates’ profits have already outstripped last year’s $80 million by reaching some $120 million in the year as of September, Captain Xavier Mesnet of the French Navy, told the conference

Source: The Insurance Networking News